Spanish Stocks May Rally 18% in Six Months, Says Paradigm

Spanish stocks may advance as much as 18 percent in the next four to six months after breaking through a key level, according to an analyst at Paradigm Capital Inc.

The country’s benchmark gauge has rallied above the 7,200 level, confirming a double-bottom reversal pattern that signals that a rally has begun, Paradigm’s Tina Normann wrote in a note today.

The IBEX 35 Index (IBEX) has rallied 26 percent since its 2012 low on July 24 amid better-than-expected company revenues, speculation policy makers will do more to stimulate the global economy and European Central Bank President Mario Draghi’s pledge to preserve the euro.

The reversal pattern is also backed by momentum, Normann said. The moving average convergence/divergence indicator, or MACD, on the IBEX 35 shows a buy signal, Normann wrote. This resurgence in momentum strength means that the gauge may break out above the 18-month downtrend near 7,600, supporting an increase toward 8,800, Normann wrote.

The IBEX 35 dropped 1.2 percent to 7469.6 in Madrid yesterday as Germany’s Bundesbank criticized an ECB plan to lower the sovereign yields of the euro area’s most-indebted nations through bond purchases.

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